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EDITORIAL 

FROM  THE 

^New  Orleans  Picayune  of  July  6,  1905. 

o‘cf  Ac,  c) 


Government  Control  of  Railroads. 


The  Chicago  Record-Herald,  in  its  issue  of  July  3,  prints  an 
editorial  article  on  the  Esch-Townsend  bill  to  establish  in  the 
hands  of  the  Federal  Government  the  power  to  regulate  and  fix 
railroad  freight  rates. 

The  bill  in  question  passed  the  House  of  Representatives  in 
the  last  Congress,  but  failed  in  the  Senate.  It  is  still  a subject 
of  interesting  discussion,  and  the  Record-Herald  invites  debate 
in  connection  with  a proposition  of  its  own.  Two  principal 
objections  to  the  bill  are  stated  by  the  Record-Herald,  thus : 

“First — The  broad  objection  to  the  exercise  of  the  rate- 
making function  by  any  governmental  agency. 

“Second — The  more  specific  objection  that  injustice  is  done 
the  railroads  in  that  the  bill  proposes  that  the  rate  fixed  by  the 
Commission  shall  go  into  effect  after  thirty  days,  although  the 
courts  may  subsequently  declare  it  unreasonable  or  confis- 
catory.” 

The  Record-Herald  accepts  the  right  of  the  National  Govern- 
ment to  regulate  and  control  railway  rates.  The  only  matter 
which  troubles  that  journal  in  this  connection  is  whether  the 
rate  fixed  by  the  Commission  shall  go  into  operation  authorita- 
tively before  it  can  be  questioned  by  the  courts,  or  whether  it 


2 


shall  remain  in  abeyance  until  finally  settled  by  the  judicial 
authority.  The  Record-Herald  proposes  to  remove  all  objec- 
tions by  the  following,  which  it  tenders : 

“In  the  event  that  a rate  is  declared  unreasonable  or  un- 
justly discriminating  by  the  Interstate  Commerce  Commission 
and  a new  rate  substituted,  the  new  rate  shall  go  into  effect 
thirty  days  thereafter,  unless  the  railroad  or  railroads  affected 
appeals  to  the  Court  of  Transportation,  in  which  event  the 
shipper  or  passenger  shall  pay  at  the  old  rate  until  the  decision 
of  the  Commission  is  finally  sustained,  but — 

“The  railroad  collecting  the  freight  charge  or  selling  the 
passenger  ticket  shall  issue  a receipt  declaring  that  a stated 
amount  (being  the  difference  between  the  rate  charged  and 
that  fixed  by  the  Interstate  Commerce  Commission)  is  in  dis- 
pute in  the  courts,  and  that  if  the  Commission  is  sustained  the 
amount  stated  will  be  refunded. 

“The  railroad  is  thereupon  to  place  this  money  in  escrow  in 
prescribed  depositaries,  and  file  with  the  Interstate  Commerce 
Commission  at  frequent  intervals  detailed  statements  of  the 
persons  (and  amounts  to  whom  such  receipts  have  been  issued. 

“In  the  event  that  the  rate  of  the  Commission  shall  be  up- 
held by  the  Court,  the  amount  in  escrow,  together  with  accrued 
interest,  shall  be  repaid  to  the  shipper  or  passenger,  and  if 
the  rate  of  the  railroad  shall  be  upheld  the  amount,  with  ac- 
crued interest,  shall  be  paid  to  the  railroad.” 

This  arrangement  for  what  it  is  proposed  seems  entirely 
acceptable.  But  it  is  not  a proposition  which  the  Picayune 
is  ready  to  discuss.  The  Picayune  does  not  admit  the  wis- 
dom and  equity  of  Federal  control  of  railroads.  It  does  not 
favor  Federal  ownership,  and,  therefore,  it  does  not  accept 
any  assumption  of  Federal  power  to  control  or  fix  freight 
rates. 

Under  existing  laws  every  act  of  the  Interstate  Commerce 
Commission  is  subject  to  attack  and  revision  by  the  courts 
before  it  possesses  any  authority  or  finality,  and  it  happened 
that  the  courts  have  largely  undone  the  rulings  of  the  Com- 
mission; but  under  the  proposed  law  the  Commission  would 


3 


possess  full  authority  to  perform  many  acts  which  could  not  be 
attacked  by  the  courts. 

The  real  issue  in  the  entire  matter  is  as  to  the  wisdom  of 
giving  to  the  Federal  Government  the  right  to  fix  prices  for  any 
service  or  any  article  of  commerce.  Grant  it  in  the  case  of 
railroad  freights,  and  it  follows  in  the  matter  of  wages  and 
prices  of  necessaries.  There  is  no  line  of  demarkation.  It  is 
impossible  to  make  any  distinctions.  If  the  Government  can 
regulate  the  prices  of  railroad  transportation  it  can  do  the  same 
with  the  prices  of  steel,  sugar  and  any  and  every  other  article  of 
use  produced  by  a trust,  and  so  it  can  with  the  wages  of  the 
laborers  who  work  for  the  trusts  and  corporations. 

From  this  it  is  seen  that  a vast  domain  of  discussion  as  to  the 
exercise  of  power  by  the  Federal  Government  is  opened  up, 
expanding  as  we  pass  through  it  until  it  embraces  the  entire 
subject  of  national  paternal  socialism.  But  there  is  another 
consideration  in  the  making  of  rates  which  is  very  important, 
and  briefly  it  is  as  follows : 


V 
i 

*o 

V 

4 


A Government  commission  authorized  to  make  railway  rates 
would,  it  is  assumed,  adopt  the  weight-mile  basis,  and  for 
every  equal  distance  for  equal  weights  of  freight  the  rate  for 
carrying  would  be  the  same.  For  example,  allowing  that  the 
distance  from  Chicago  to  New  York  and  to  New  Orleans  is 
equally  900  miles,  it  would  result  that  a carload  of  grain 
carried  to  New  York  or  to  New  Orleans  from  Chicago  would 
be  charged  for  at  the  same  amount,  and  no  attention  would 
be  paid  to  the  fact  that  the  route  to  New  York  is  over  two 
mountain  ranges,  while  that  to  New  Orleans  is  down  a gentle 
grade  and  that  a given  power  can  draw  two  cars  to  New 
Orleans,  whereas  it  could  draw  only  one  to  New  York.  If 
the  National  Commission  or  Board  should  fail  to  recognize 
this  feature  in  the  situation,  it  would  either  charge  the  shipper 
to  New  Orleans  too  much,  or  it  would  force  the  railroad  carry- 
ing to  New  York  to  work  for  a rate  unreasonably  low. 


LIBRARY  5- 

UNIVERSITY  OF  MW** 


4 


These,  in  brief,  are  the  reasons  why  the  Picayune  does  not 
favor  Federal  control  of  railroad  rates,  and  they  are  offered 
in  connection  with  the  request  of  the  Record-Herald,  although 
they  are  scarcely  pertinent. 


Washington  Correspondent  of  the  New  Orleans  Picayune. 


Reference  to  the  Hearings  Before  the  Interstate  Commerce 
Committee  of  the  Senate. 

(Published  July  6,  1905.) 

How  the  Proposed  Regulation  of  Railroad  Rates  May 
Affect  New  Orleans. 


PICAYUNE  BUREAU, 

Post  Building, 

Washington,  D.  C.,  July  5,  1905. 

jfc  >jc  ifc 

RAILWAY  RATES. 

The  recent  hearing  before  the  Senate  Committee  on  Inter- 
state Commerce  brought  out  the  fact  that  New  Orleans  and  the 
other  Gulf  ports  have  a peculiar  interest  in  the  proposition  to 
confer  upon  the  Interstate  Commerce  Commission  the  power  to 
make  freight  rates  and  fix  differentials  between  the  ports.  It 
was  developed  that  complaints  that  rates  are  too  high  per  se 
were  limited  to  very  few  cases,  for  the  adjustment  of  which  the 
present  laws  are  ample.  Most  of  the  complaints  that  were 
brought  to  the  attention  of  the  Committee  on  which  the  demand 
that  the  Interstate  Commerce  Commission  be  given  power  to 
make  rates  is  based  are  complaints  that  rates  that  are  reasonable 
in  themselves  are  unjust  to  certain  localities  which  are  either 
not  so  favorably  situated  geographically  or  which  are  served  by 
railroads  that  are  less  enterprising  than  are  those  leading  to  the 
localities  complained  of.  In  other  words,  the  demand  is  that 


5 


the  Interstate  Commerce  Commission  shall  be  given  power  to 
fix  differentials,  and  to  say  to  what  extent  a given  locality  is  to 
enjoy  its  natural  advantages  or  profit  by  the  enterprise  of  its 
citizens  and  its  railroads. 

There  are  no  localities  in  the  United  States  more  vitally  in- 
terested in  this  proposition  than  are  New  Orleans  and  the  other 
Gulf  ports.  It  is  not  an  exaggeration  to  say  that  the  prosperity, 
if  not  the  very  existence  of  these  ports  as  gateways  of  foreign 
commerce,  is  dependent  upon  the  maintenance  of  equitable  dif- 
ferentials betwen  them  and  the  North  Atlantic  ports.  If  these 
differentials  can  better  be  maintained  by  giving  the  Interstate 
Commerce  Commission  the  power  to  fix  them,  it  is  to  the 
interest  of  the  Gulf  ports  to  favor  the  proposed  legislation.  If 
they  can  best  be  maintained  by  relying  on  the  railroads  and  on 
the  desire  of  the  railroad  managers  to  increase  their  traffic  and 
build  up  the  territory  tributary  to  them,  it  is  to  the  interest  of 
the  Gulf  ports  to  oppose  giving  to  any  Governmental  agency 
the  control  over  freight  rates. 

Taking  New  Orleans  and  New  York  as  examples,  the 
reasons  why  a substantial  differential  on  export  traffic  in 
favor  of  New  Orleans  is  justified  and  required  are  apparent. 
On  the  one  hand  there  are  certain  disadvantages  at  New 
Orleans  that  must  be  overcome.  These  include  the  longer 
ocean  voyage  from  New  Orleans,  the  comparative  irregularity 
of  steamer  sailings,  and  the  river  navigation  from  the  city  to 
the  gulf.  On  the  other  hand,  New  Orleans  has  one  great 
advantage  that  justifies  the  railroads  leading  to  it  from  the 
great  grain-producing  section  of  the  country  in  making  lower 
rates  than  can  be  made  by  the  roads  leading  to  the  North 
Atlantic  ports,  and  that  is  the  absence  of  heavy  grades  which 
add  enormously  to  the  cost  of  operating  the  roads  across  the 
Allegheny  Mountains.  In  the  expressive  language  of  Mr. 
James  J.  Hill : 

“You  can  kick  a barrel  of  flour  at  Minneapolis,  and  it  will 
roll  to  New  Orleans.” 


6 


In  overcoming  the  disadvantages  of  the  gulf  ports  and  by 
taking  advantage  of  their  lack  of  heavy  grades  the  railroads 
to  New  Orleans  and  the  other  gulf  ports  have  established 
differentials  that  are  giving  to  the  gulf  a fair  share  of  the 
export  trade  of  the  country,  and  a constantly  increasing  share 
of  the  import  trade.  In  order  to  force  the  recognition  of  this 
differential  by  the  eastbound  roads  they  have  at  times  been 
compelled  to  engage  in  rate  wars  that  have  left  little  compen- 
sation for  the  carriers,  but  that  have  benefited  the  producers 
in  the  grain-growing  States,  and  have  contributed  to  the  build- 
ing up  of  the  terminal  cities  on  the  gulf.  All  of  this  has  not 
been  done  by  the  southbound  roads  through  motives  of  philan- 
thropy. They  have  been  governed  by  selfish  motives — by 
their  desire  to  increase  their  tonnage,  and,  therefore,  their 
earnings,  and  by  the  desire  to  build  up  their  terminals  and 
all  of  the  localities  on  their  lines  for  the  reason  that  increased 
prosperity  at  the  terminals  and  all  along  the  lines  means  in- 
creased tonnage  and  increased  revenue. 

The  latest  official  statistics  of  imports  and  exports — those 
for  the  eleven  months  ending  May  31,  this  year — show  the 
degree  of  success  which  the  roads  leading  to  New  Orleans  are 
attaining  in  their  efforts  to  build  up  the  grain  export  business 
through  that  port.  Owing  to  the  shortage  of  the  wheat  crop 
last  year,  the  exports  of  wheat  from  the  United  States  during 
the  eleven  months  amounted  to  practically  nothing,  and  the 
grain  movement  was  confined  almost  entirely  to  corn.  The 
statistics  show  that  the  total  shipments  of  corn  through  New 
Orleans  for  the  eleven  months  amounted  to  18,715,102  bushels, 
or  over  22  per  cent  of  the  total  exports  of  corn  from  the  United 
States.  For  the  corresponding  period  last  year  the  exports  of 
corn  from  New  Orleans  amounted  to  4,105,836  bushels,  or  less 
than  8 per  cent  of  the  total  for  the  entire  country.  In  other 
words  the  exports  of  corn  through  New  Orleans  for  the  eleven 
months  ending  May,  this  year,  were  355  per  cent  greater  than 
during  the  corresponding  months  last  year. 


7 


If  New  Orleans  and  the  other  Gulf  ports  are  to  compete  suc- 
cessfully with  the  North  Atlantic  ports  for  the  export  business 
of  the  country,  ships  coming  from  Europe  for  cargoes  of  grain 
must  be  able  to  carry  cargoes  of  merchandise  in  this  direction 
• and  obtain  favorable  rates  from  the  ports  to  .the  consuming 

centers  in  the  interior.  This  has  been  appreciated  by  the  rail- 
roads, and  that  they  have  not  hesitated  to  make  rates  that  would 
bring  imports  to  the  Gulf  was  shown  by  testimony  before  the 
Senate  Committee.  One  instance  cited  was  that  of  a rate  made 
on  plate  glass  from  New  Orleans  to  Chicago  by  the  Illinois 
Central  Railroad  that  is  as  low  as  rates  on  similar  glass  from 
Pittsburg  to  Chicago.  This  rate  has  been  made  the  subject  of 
a complaint  to  the  Interstate  Commerce  Commission  by  the 
Pittsburg  glass  manufacturers,  and  the  case  is  now  pending 
before  the  Commission,  but,  in  the  meantime,  it  is  contributing 
to  the  building  up  of  New  Orleans  as  a gateway  for  foreign 
commerce. 

Inasmuch  as  the  interests  of  the  railways  and  of  the  Gulf 
ports  in  maintaining  adequate  differentials  against  the  North 
Atlantic  ports  are  identical,  it  may  well  be  questioned  whether 
the  ports  would  fare  as  well  if  the  making  of  rates  should  be 
taken  out  of  the  hands  of  the  roads  and  the  Interstate  Com- 
merce Commission  should  be  authorized  to  determine  what  the 
differentials  between  the  ports  should  be.  In  the  matter  of  the 
import  rates  on  plate  glass  now  pending  before  the  Commission, 
it  is  doubtful  if  any  order  that  might  be  made  would  be  en  forced 
by  the  courts  as  the  law  now  stands,  but  the  tone  of  some  mem- 
bers of  the  Commission  in  commenting  on  it  before  the  Senate 
Committee  indicates  that  if  the  Commission  had  the  power  to 
do  so  it  would  put  a stop  to  this  particular  step  in  the  building 
up  of  the  import  trade  of  New  Orleans.  Commissioner  Clem- 
ents declared  that  it  had  never  seemed  to  him  to  be  a reasonable 
adjustment.  There  are  also  remarks  in  the  testimony  of  the 
Commissioners  that  indicate  a belief  that  the  roads  leading  to 
the  Gulf  ports  have  at  times  made  rates  for  the  transportation 


of  grain  so  low  as  to  have  justified  interference  by, the  Com- 
mission. ; V-'U 

Railroad  rates  and  differentials  to  the  various  ports  of  the 
United  States  are  now  the  result  of  the  free  competition  of 
the  ports  and  of  the  carriers  serving  them.  If  the  making  of 
rates  and  the  fixing  of  differentials  should  he  turned  over  to 
the  Interstate  Commerce  Commission,  or  any  other  govern- 
mental agency,  that  agency  would  necessarily  have  to  adopt 
some  fixed  rule  that  would  limit  competition.  The  adoption 
of  such  a system  would  he  equivalent  to  saying  to  New  Orleans 
and  the  gulf  ports,  and  to  the  railways  leading  to  them:  “Thus 
far  shall  you  enjoy  the  advantages  of  your  geographical  loca- 
tion and  of  your  enterprise,  but  here  \Vou  shall  stop.  You 
must  not  put  rates  so  low  as  to  cut  into  the  business  of  the 
North  Atlantic  ports,  or  hamper  the  roads  leading  to  them, 
with  their  heavy  mountain  grades  and  indirect:  routes.” 


